Why we need regulation of the derivatives market, and why it is so hard to get. Punchline: The time bomb is still ticking andthe number is somewhere like $600 TRILLION. Try and get to see it. Then write your Congressman and Senators... I don't think we can count on Larry Summers to do it...
Riverside Info » About Riverside
Frontline was dynamite tonight. (WTTW)
(6 posts)-
Posted Tuesday Oct 20, 2009 21:59 #
-
Here's a link to get the above.
http://www.pbs.org/wgbh/pages/frontline/warning/
I urge everyone to read it and look at the program.
We had zero derivatives in 1980. Today over $600 TRILLION, and totally uncontrolled. One bank had $4 billion leveraged to over a trillion dollars. Nobody knows how much of this stuff there is, who owns it, what the paper it is printed on says, etc. And some of the same guys - like Larry Summers - that sided with Greenspan to prevent regulation are now supposed to clean up and regulate this industry? It seems that all the administrations seem to think there are only a handful of people that can run this system, and they keep recycling the same guys from Wall Street to the Treasury, etc. It's like the NFL - have a terrible team and lose every game and they fire you, and right away you go on the "A" list for a new coaching job. It's bizarre....
FIRST LTCM, then this meltdown which was much worse - and what comes next? It either gets fixed now or it will break again...
Blockquote: "Neo-Keynesian theory is null and void during our current economic implosion just as Newton’s laws of physics no longer apply when approaching the event horizon of a black hole. Simply put; governments cannot print enough money to solve the problem. There are currently over $600-trillion-plus worth of derivative swap and securitization products floating in financial purgatory while the total gross domestic product for the G7 is barely $40-trillion and the world's GDP is less than $70-trillion.
Meanwhile, the Fed, FDIC and the Treasury have only this year added 7.5 trillion in liabilities to their balance sheets. That's more than 50% of the current US GDP – and we haven’t even begun to tally up the cost of Obama’s promised largesse which will eventually generate a total of over 1 million dollars of federal fiscal debt per US household. The Fed could become the third US central bank in history to go bankrupt before this sad story ends in tears.
Tom Mueller Oct 20, 2009 22:17 "BlockquotePosted Wednesday Oct 21, 2009 11:38 # -
It's all part of the new world order. The US could not possibly pay the debt on this, nobody could. the whole plan was to start over, with all countries on an equal footing, even the third world countries. the new world order, with one world currency. at this point, the US is a third world nation. and obama wants to spend more on national health care?
the only ones who don't have anything to worry about are the unions and public school administrators [edited by admin], with their double digit guaranteed salary increases-- and pensions. let's not forget the pensions. But what will happen when they raise taxes high enough to pay for them? more foreclosures and more bankruptcies. I don't imagine they care, as long as they get what they have coming to them.
Posted Friday Oct 23, 2009 21:00 # -
There are so many scenarios that could play out - unfortunately not many of them are good. My biggest fear is the hyperinflation scenario...
On the positive (hopefully) side - the future was black after the LTCM fiasco, post S&L debacle, the world was ending in October 1987 and again when the tech bubble burst. We have always found a way to put it in the rearview mirror.
Sadly, we never seem to learn from our mistakes.....
Posted Friday Oct 23, 2009 21:12 # -
Another important Frontline program tonight. Illustrates just how the recession/depression is hitting "Close to Home." Check it out..
http://www.pbs.org/wgbh/pages/frontline/closetohome/
With manufacturing all but gone, union numbers depressed, and workers herebeing forced to compete with the wages paid in China, Mexico and Bangladesh, how do we revive the Middle Class? If/when that doesn't come back, who pays the bills?
Posted Tuesday Oct 27, 2009 23:22 # -
Here it comes...
Now that Nouriel Roubini has dispensed with the current slump, it's time to move on to the next global calamity.
The New York University professor, nicknamed Dr. Doom for his famously grim but accurate prediction of the financial meltdown that flattened economies around the world, said Thursday the U.S. recession appears to be over. But he warned that a new asset bubble fuelled by rock-bottom interest rates and a falling U.S. dollar could trigger another financial disaster.
“This asset bubble is totally inconsistent with a weaker recovery of economic and financial fundamentals,” Dr. Roubini told a conference in Cape Town, South Africa, by satellite, reported by Bloomberg News.
“The risk is that we are planting the seeds of the next financial crisis.”
The culprit: Investors around the world borrowing cheap U.S dollars and using them to snap up equities, corporate bonds, commodities and other assets, driving up prices far beyond what could be justified by economic fundamentals or growth prospects.
“We have the mother of all carry trades,” Dr. Roubini said, referring to the practice of borrowing in one currency at low interest rates and investing the money in another currency or asset at higher rates of returns.
“He's right that if everybody piles into any sort of carry trade, we will see a bubble,” said Arthur Heinmaa, managing partner with Toron Capital Markets in Toronto.
But it's not just the U.S. dollar. Every major central bank is essentially making money available interest-free, paving the way for opportunistic profits.
The only thing reining them in is the tighter availability of credit and demands for much more collateral in today's environment, Mr. Heinmaa said.
“When you can borrow at zero and buy government bonds at 3 [per cent], you're making an absolute fortune.”
But where Dr. Roubini sees bubbles, others see the necessary groundwork being laid for a recovery.
One of the consequences of aggressive monetary easing is that the value of financial and other assets has shot up, said Avery Shenfeld, chief economist at CIBC World Markets.
“But at times like this, that's a plus. You can't really complain that a consequence of low interest rates is to revitalize the equity market and the housing market worldwide, because that's what you're counting on to help the economy out of its misery.”
Meanwhile, another influential voice in the investment community said the U.S. rally that has driven up the value of stocks, bonds and other assets since March has nowhere further to run without a return to normal economic growth.
“What has happened is that our ‘paper asset' economy has driven not only stock prices, but all asset prices higher than the economic growth required to justify them,” famed bond fund manager Bill Gross wrote on the Web site of his money management firm, Pacific Investment Management Co. (Pimco) of Newport Beach, Cal.
“Investors must recognize that if assets appreciate with nominal gross domestic product, a 4-5 per cent return is about all they can expect even with abnormally low policy rates,” Mr. Gross said. “Rage, rage against this conclusion if you wish, but the six-month rally in risk assets … is likely at its pinnacle.”
Mr. Gross and his Pimco colleagues dismiss the prospects for a traditional V-shaped recovery and warn that the U.S. is facing a “new normal” of tight credit, higher inflation, slow growth and elevated unemployment levels.
Here's some numbers you may want to mull over...
http://www.rgemonitor.com/blog/roubini/257892/bloombergs_reporting_of_my_remarks
Posted Tuesday Oct 27, 2009 23:27 #
Reply
You must log in to post.